Pouring it on Relaxed laws have craft brewers looking to tap wider market

By ,
May 15, 2013 at 3:00 AM

(AARON HOUSTON)

Iron Hill Brewery & Restaurant opened its first New Jersey location in 2010, and liked what it saw.

The Delaware-based craft brewery already owned several brewpubs in Delaware and Pennsylvania, but they saw plenty of market potential in the Garden State.

"We felt it was a lucrative market, and we were correct," said Mark Edelson, co-owner, co-founder and director of brewery operations. "We've been very successful with our one location."

That praise comes with the typical qualifiers of high costs and unfriendly business laws, which are a particular thorn in the side for brewers. Until last year, breweries were allowed to open only two brewpubs — breweries that sell food — in the state. That restriction, plus the steep price of a liquor license here, left the state lagging behind in the craft brewing industry, which has been on the rise nationally in recent years.

According to the trade group Brewers Association, New Jersey ranked 42nd in the nation in breweries per capita as of 2011. The state ranks 32nd in the nation in total breweries, despite being 11th in total population.

However, a new law enacted in September upped the number of brewpub licenses a firm can own from two to 10, and increased limits for tastings and sales. Already, many of the 21 members of the Garden State Craft Brewer's Guild are planning expansions.

"It allowed us to spend about $300,000 fitting out a space for the tasting room, and we've already created two jobs because of that, and we'll probably be adding a couple of part-time jobs," said Gene Muller, co-owner and general manager of Flying Fish Brewing Co., in Somerdale.

Those new employees will staff the production brewery's tasting room, which will expand. Previously open three hours a week, Muller said they'll now likely keep the tasting room open five days a week, probably for five hours a day.

Muller's firm has become a big name among craft beer enthusiasts in the state, but "who I think it's (the law) really going to help are the smaller guys and startups," he said. Startups often don't produce enough beer to entice distributors, he said, but it's difficult to boost production unless their beers are on liquor store shelves. It's a Catch-22.

Now, Muller said, those breweries can sell their beer out the door and organically create demand as those customers begin requesting the beer at their local liquor stores. If liquor stores start requesting it, he said, distributors are more likely to distribute it.

Eric Orlando, a lobbyist at Kaufman Zita Group, said the law helped level the playing field between New Jersey breweries and out-of-state brewers.

"The fact was, a lot of the state laws that were in place that impacted production breweries and brew pubs were put in place right after Prohibition, and hadn't really been updated since then," he said.

The new regulations will have significant economic consequences, he said. Edelson, for instance, said each Iron Hill brewpub creates about 100 jobs. The company already was preparing to open a second New Jersey location in Voorhees before the legislation was signed. Now, they're eying more locations, he said.

The law did draw some opposition, most vehemently from the New Jersey Restaurant Association, which worried about the new brewpubs' impact on local restaurants and on the price of liquor licenses.

Marilou Halvorsen, New Jersey Restaurant Association president, said restaurants have to jump through many hoops, and pay many thousands of dollars, to get a liquor license. She said their only interest is making sure everyone plays by the same rules.

"No one is afraid of competition, but when it's unfair competition is when we have an issue with it," said Halvorsen.

Orlando said brewpubs still must secure regular local liquor licenses, in addition to their brewery approvals, so the law could potentially create demand and boost the value of those licenses.

The breweries also fended off concerns from distributors. "We're going to price the beer the same as the liquor stores," Muller said. "We're not going to compete with liquor stores, because that's where we sell most of our beer."